In what will come as a relief for telecom companies, the Department of Telecommunications (DoT) has said that no spectrum usage charge (SUC) will be charged for spectrum acquired through auctions held after September 15, 2021. The order comes days after the country took its first step towards 5G rollout as the Union Cabinet cleared a proposal to invite applications for spectrum auctions.
“For spectrum acquired through auctions held after 15.09.2021 in different access spectrum bands, no SUC shall be charged,” a notification by the DoT said, adding, “The weighted average is to be derived by the sum of the product of spectrum holdings and applicable SUC rate, divided by (a telco’s) total spectrum holding.”
SUC is calculated through an average weighted formula for telecom companies (telcos) who have a mix of administratively allocated spectrum and spectrum acquired through auctions.
Since telcos like Airtel and Vi have a mix of both kinds of spectrum while Jio has all its spectrum through auctions, in 2016, the Centre fixed the SUC floor rate at 3 per cent of a telco’s adjusted gross revenue (AGR).
The DoT’s latest order does not mention the SUC floor rate, which, according to industry executives, suggests that the requirement has been removed in order to facilitate the upcoming spectrum auctions.
The DoT’s order addresses a long standing demand by the industry to have the floor rate scrapped. Telecom operators have welcomed the decision.
“We welcome and thank the Government & Minister of Communications for the much-awaited DoT order regarding the levy of SUC charges for spectrum in 600 MHz, 700 MHz, 800 MHz, 900 MHz, 1,800 MHz, 2,100 MHz, 2,300 MHz, 2,500 MHz, 3,300 MHz and 26 GHz bands. The order will provide clarity to telecom service providers for the upcoming auctions,” said S P Kochhar, director general of telecom industry body Cellular Operators Association of India (COAI), which counts all the three major telcos — Airtel, Jio and Vi — as members.
Last week, the Union Cabinet cleared a proposal to auction over 72,000 megahertz (MHz), or 72 GHz, of airwaves with a validity period of 20 years. The auction will be held for spectrum in the frequencies of 600 MHz, 700 MHz, 800 MHz, 900 MHz, 1,800 MHz, 2,100 MHz, 2,300 MHz, 3,300 MHz and 26 GHz bands. At reserve price, the entirety of the spectrum is valued at over Rs 5 lakh crore.
Last year, the Centre had announced a telecom sector relief package, and some facets of the scheme have been included in the terms of this auction. A mandatory requirement to make upfront payment by the successful bidders has been done away with. Payments for spectrum can be made in 20 equal annual instalments to be paid in advance at the beginning of each year. Bidders would be given an option to surrender the spectrum after 10 years with no future liabilities with respect to balance instalments.